Hi anon,
If you need 100K CI cover with inflation hedging over time, the accumulated cash value (while not guaranteed) will act as that inflation hedge.
I ran a sample plan from an insurer for my own age profile to check the numbers, with late stage CI cover build in. Paying $2574 for 25 years, with $100K cover and no multiplier in effect, 40 years later, the benefit will be $212K with a 4.75% projection, and my IRR calculations have the figure at 4.3% yield. (3.25% figures will have the yield at 2.38%). I'm basing the yield/returns on my cashflow and not what $100K will be worth in 40 years.
This is reasonable in my opinion because
I only pay when I'm working
My coverage after 40 years is a decent sum
My coverage will continue to compound at least till I claim
To complete the analysis, $100K now is actually worth $216K 40 years later at 2%. So I suppose you could say that in my example, the plan barely kept pace with 2% inflation. However, never forget that unless you can conjure $100K immediately, your risk is greater in the early years of your working life, so there is a purpose to the plan.
Now, about being covered during working years. That's a must. However, even in your retirement years, would you rather dig into your own savings in the event you need a cash injection due to illness, or would you rather have a payout from a policy? For death coverage, if you are no longer around, and your liabilities are paid off, then there's no real need for cover (i.e. when you've retired). So a term plan to cover death is always very cost effective. But when we talk about critical illness, you might be financial strained if something happens in your golden years, and having a payout will ease some of that strain.
Hi anon,
If you need 100K CI cover with inflation hedging over time, the accumulated cash value (while not guaranteed) will act as that inflation hedge.
I ran a sample plan from an insurer for my own age profile to check the numbers, with late stage CI cover build in. Paying $2574 for 25 years, with $100K cover and no multiplier in effect, 40 years later, the benefit will be $212K with a 4.75% projection, and my IRR calculations have the figure at 4.3% yield. (3.25% figures will have the yield at 2.38%). I'm basing the yield/returns on my cashflow and not what $100K will be worth in 40 years.
This is reasonable in my opinion because
I only pay when I'm working
My coverage after 40 years is a decent sum
My coverage will continue to compound at least till I claim
To complete the analysis, $100K now is actually worth $216K 40 years later at 2%. So I suppose you could say that in my example, the plan barely kept pace with 2% inflation. However, never forget that unless you can conjure $100K immediately, your risk is greater in the early years of your working life, so there is a purpose to the plan.
Now, about being covered during working years. That's a must. However, even in your retirement years, would you rather dig into your own savings in the event you need a cash injection due to illness, or would you rather have a payout from a policy? For death coverage, if you are no longer around, and your liabilities are paid off, then there's no real need for cover (i.e. when you've retired). So a term plan to cover death is always very cost effective. But when we talk about critical illness, you might be financial strained if something happens in your golden years, and having a payout will ease some of that strain.